Efficient Market Hypothesis

In the short term, the market is heavily influenced by new information and noise.

In the long term, there are clear trends that can give you an edge to beat the market.

We’ll discuss a few trends that are clear but that will take time to develop.

Introduction

Some argue that the market is efficient and prices always reflect available information. The Efficient Market Hypothesis (EMH) was developed by Chicago School of Economics Professor Eugene Fama who was also awarded a Nobel prize for his findings in 2013. Implications of the EMH are that it is impossible to beat the market consistently on a risk-adjusted basis since market prices only react to new information or changes in discount rates. More →